Is loyalty rewarded by credit card providers?
Credit card companies tend to reserve their best deals for new customers. It is a sad fact that loyalty is not well rewarded by most credit card companies.
New customer offers are a big part of the credit card market, and can be very lucrative for the credit card borrower. This is because many credit cards are over their life time lucrative for credit card providers, and to attract the “right “ customers (those who will incur lots of interest but not cause too much administrative trouble) credit card companies are prepared to spend a lot on marketing.
One tactic that credit card companies have learned is that it can sometimes be cheaper to attract people by sharing the introductory benefits with them and so saving on the marketing spend. This means that for a short time there can be considerable benefits on a card. However, loyal customers can rarely get these benefits as there is no need to attract them.
One of the most important new customer offers are zero interest rate cash balance transfers. These are when a customer transfers a balance on to the credit card and for a period of time – usually between three and fifteen months – no interest is charged.
These offers are rarely open to new customers. This has meant that people who want to take advantage of these new offers are often advised to cancel unused credit cards, although this may have an effect on their credit rating as the ratio of credit advanced to credit available has risen. Customers who have previously had a credit card with the provider but have cancelled it will start to be able to take up new customer offers between six months to a year after they have cancelled the old account.
The practice of constantly opening new accounts with a zero rate introductory balance transfer, transferring it as soon as the offer runs out and then closing the account to avoid any penalties for loyalty is often called “stoozing”.
Other new customer offers that are quite common are lower interest on purchases; accelerated rewards for a short period (for example an extra store card discount) and accelerated cash back amounts – sometimes as high as 5%.
Another disincentive to loyalty is when a customer is on an un-marketed card. If a card is no longer being marketed, then the credit card provider is no longer under any pressure to offer decent terms and conditions. If a credit card user finds that the card is no longer marketed (for example it does not appear on comparison engines) then this is a sign that the card user should shop around for a new card.